What it takes to be a Successful Entrepreneur: DukeGEN sits down with Howard Lerman Co-founder and CEO of Yext

By Jeremy Welch; Published February 1, 2010

Howard Lerman founded Yext in 2006 with the vision of improving the way local businesses and consumers connect. Yext is Howard's fourth internet company, the past three of which have had successful exits. Howard is a graduate of Duke University.

"The Next Yellow Pages" is the tagline for your company. Can you tell me why are your company is the next Yellow Pages?

With the advent of the internet, local search has become highly fragmented. Before, people used to use one thing--a Yellow Pages book, or a yellow book--to find a local service they're looking for. Since the internet has arrived people have begun using all different sorts of sites, applications, and devices to find a local business.

This is a tremendous innovation and leap forward for consumers. Because now, if you're on the side of the road with a broken windshield on your car, you can whip out your iPhone and pull up a RepairPal app, and find a windshield repair guy really easily. If you have back pain, you can immediately go to WebMD and find information on chiropractors or any sort of doctor you might want.

The ability for a consumer to find device agnostic, vertically specific information in real-time is a quantum leap forward for information discovery. But it's actually presented a huge challenge for local advertisers. So now, local advertisers that historically had a single relationship--The Yellow Pages--now have to figure out a way to reconcile having relationships with Google, Yahoo, Bing, WebMD, iPhone, Yelp, the YellowPages.com, SuperPages.com, and then the 15,000 other small websites or different sorts of iPhone apps that people use to find local businesses.

So Yext has stepped in to help and it's interesting. When you think of Yellow Pages, you think of it as a consumer brand. But really it's a brand for local businesses, because that's how local businesses have historically found what it is that they're after; it’s how they’ve attracted new customers. So, when we say, "We're the next Yellow Pages," we mean that we’re very focused on the local advertising experience and have stepped in to solve this fragmentation problem for the local advertiser.

We get a business--one of our customers—listed not just on Yext.com, but listed on a network of websites across the entire internet. So, Yext has built up a network of hundreds of local publishers where if an individual veterinarian connects to Yext Calls, which is our local advertising product, they're being listed across the Web.

That's the first thing. The second thing is the interesting way in which we solve this problem. We have performance-based advertising in our DNA. Google has pushed that forward with pay-per-click advertising. Well, we've taken this several steps forward.

We're not really an agency in that we don't pay a commission on spending across a thousand sites. What we do is we say to a local advertiser, "We're going to get you listed across the entire internet. You're going to only pay us if, and only if, you get a…" and this is really the magic of Yext, “pay-per-action phone call.”

So, our business model is pay-per-action phone calls. Local advertisers pay us only when we make their phone ring--and not only their phone ring with any old phone call. Yext automatically understands the speech that occurs in the phone call, transcribes the call, and looks for relevant keywords that occur in the phone call to determine if and how much to charge for that phone call.

So, just like Google has pay-per-click advertising in different amounts for different keywords, Yext has a pay-per-action phone call auction where local advertisers bid different amounts for different kinds of phone call keywords.

Was this part of the announcement from TechCrunch 50?

Yeah. So, at TechCrunch 50, we came out of our shell. We switched all of our business over from a straight pay-per-call model--which is just billing every phone call that comes in--to a pay-per-action phone call model.

So, we tweaked our model and it was a big, risky move, and it worked.

How has the response been?

It's been phenomenal.

I mean, if you're a TV repair shop sitting around in the worst economy since The Great Depression, and we call you up and say,"Look: we're going to be able to get you phone calls of customers that need their TVs repaired, and we're going to bill you different amounts--whether or not it's a Mitsubishi job, or a Samsung job. And we can understand that with 97 percent accuracy and bill you accordingly.”

That's a fairly compelling value proposition. Especially since there's no risk.

Tell me about the energy here at Yext, and your energy onstage at TechCrunch 50. You had this crazy energy. Where does that energy come from?

Well, I think as an entrepreneur -- it all starts with you, right? But you have to surround yourself with awesome people that share your passion. We did not found Yext to make a lot of money. A lot of people do that. We founded Yext to solve a huge problem: the local advertising problem. So, I'm very passionate about solving that problem.

How did Yext start?

I was a running in a gym. I was – it’s funny -- this is a true story.

Al Sharpton, the Reverend Al Sharpton was on a treadmill next to me. He was in spandex, and I didn't really want to be caught looking at him. Because, you know, they were tight. Anyway, I looked away from his spandex butt, and basically, out the window and I saw a gym salesperson with a giant wheel outside. It was called "The Wheel of Savings," and they were attempting to get people to come over. They were running a promotion, and everyone was a winner on The Wheel of Savings.

And I realized that what had happened was the gym salesperson couldn’t rely on The Yellow Pages anymore for people to look up the gym and call it. Instead, people were finding gyms online. So the salesperson lost their lead channel.

So that was sort of the: "Wait a minute!" That was the “A ha!” moment, if you will.

How did you build your team? Did you have friends that you brought in as co-founders?

Yes. I had two cofounders of Yext. The first is Brent Metz, who I went to high school with.

He is a speech scientist from IBM. I went to a really nerdy math and science high school called Thomas Jefferson High School in Northern Virginia. I don't know if you know any of the guys from there, but we had a supercomputer in our high school and that's how I liked to spend my weekends.

Brent was someone I stayed in touch with throughout college and sort of…career, and called him up. Then I called Brian Distelburger, who was the CEO of a company and we shared a mutual mentor. I'd gotten to know Brian over the years. So there were two additional cofounders. And I can't tell you enough about how important who you pick as a cofounder is. It's the most important thing.

Why is that the most important thing?

Well, the first thing is that you're not good at everything. I think historically, when you look at companies that have been successful, there's always more than one person behind it. There might be a frontman, but there are almost invariably other cofounders that have a stake in stuff. Founders are the most important people at a company as it gets going because of the fact that they're the only ones, typically, with the political will and the political drive to make huge changes happen and take big risks. The kind of risks that are necessary as you iterate to build a great company.

No great company starts off with the perfect idea. They basically have an idea of what they think might be good and they iterate on it over time. Founders are the people that drive that process of iteration because there's really no one else at the company that's capable of taking that risk.

Yext started off as a company that sold leads to gyms. So we've made about three or four major tweaks to our business model. And we'll continue to bet the whole company to continue to make it awesome.

Yext is based out of New York City -- why build the company here? What is the technology scene like in New York City?

I think the tech scene is actually growing pretty quickly. We can thank Google for that. Yext is a unique company, because we combine incredible old school sales techniques. Old school sales and customer service, as you can hear out there, with the most leading-edge technologists from Google, directly from MIT, and from Carnegie Mellon to build our technology. So, we had this interesting fusion of incredible sales and incredible technology--and that has been our focus. Usually I think you'd find companies have one or the other. One of the things that we've done recently is that…we've started to see the fact that Google in New York makes it a lot easier to recruit engineers that might not otherwise want to move to New York – people that are graduating college, or are in the Valley or Boston -- those kinds of typical startup areas. So I think we're going to see a renaissance here.

Do you know other people moving their companies here?

Yeah. I don't think people are moving companies here as much as…. I think what's happened is a few things. Number one, technology and media have become combined. And Google has, again, led that because it's a bunch of technologists that have built a media company. Google makes their money through advertising.

And so, where's the advertising world? It's in New York City. So, their establishment here has spawned off the talent, and then the people that joined Google early on are leaving. And a lot of them have their own startups. You're starting to see companies like Foursquare evolve, and all kinds of really interesting stuff happening here. I think you're going to see that on the uptick.

One interesting thing about New York is it's easy to be private at the same time. Yext is pretty stealth. That's why we typically don't do any interviews and we just don't think it's a big deal for people to really have a huge, deep understanding into what we're doing.

Of course, we are doing this interview because we love you, Duke.

Have you always built companies?

I have. When I was a sophomore at Duke, I founded my first company called Just A Tip, where you could send your friends anonymous tips about their annoying qualities.

It took off. I mean, it was really funny, and it was a joke. And my buddy--another buddy from high school and I made it. Actually he's the CTO of this company now.

We have, on our Executive Team, four of my high school classmates out of five folks on the team. It again underscores how important people are. But I've been on the entrepreneurial track for a long time. This is the fourth company that I've gotten going. So, I've never had a real job, if that's what you're asking.

[Laughs] Okay. So you worked on this company while at Duke? You mentioned your sophomore year?

Yeah. I don't know why…I think one thing that obviously has become possible is…. with the advent of the internet, it's easy to make companies. You don't have to build up inventory, and supplies, and do a retail location. So, it became possible to make a company from a computer, which is one dude doing a company from a computer. That's a pretty big leap.

On a micro level for me, I've always wanted to change the world. I think that's the fundamental underlying drive. It was never sort of an “A ha!” moment.

Has the Duke alumni network helped?

I would like to tell you that it has, and sit here and pretend that Duke alums are the most helpful entrepreneurs out there, and that they're awesome. Instead, I'm going to tell you the truth, which is that I have not utilized it at all.

I'm not really sure what exists or doesn’t exist. I know what it's not, and it's not a Stanford situation or anything like that, which is tremendous for stuff. I do think that Duke has a tendency to attract people that are a little bit more risk-averse.

I think there's some stuff happening now that I've started to see by talking to some of the professors at Fuqua that will produce results over the long term. Some of the stuff that you're doing with Howie [Rhee] is exciting. I think that's going to take a little while to bear fruit. You know… 5, 10 years.

I mean, that stuff doesn't happen overnight. But historically, I don’t think Duke has really been a bastion for entrepreneurship.

So to change that – what piece of advice that you would give to students?

Don't listen to your parents.

Why not listen to your parents?

Because parents are the most risk-averse people in the world.

They want you to go to Duke because it's the ranked school. They want you to go to the highest ranked school on the list. They don’t care if it's right for you.

It's Duke, Princeton--they want you to go to Princeton instead of Duke. They just want you to hedge risk, hedge risk. And then they want you to get a stable job. Whether it's a lawyer, a banker, a doctor, or a consultant.

There are four potential jobs out of college. And if you choose to go your own route, they will not be happy about that. They will try to pressure you and help you…"Oh, it's so risky."

It is not risky. If you believe in yourself, it's not risky.

On the other hand, if you fail, you could always go get one of those day jobs. You could always go be a banker, lawyer, medic--you know, doctor, and consultant. One of the big four.

So, don't listen to your parents.

You don’t sound scared of failure – why not?

Failure, to me, is something that I consider often. But in a rational way, not a sort of, "Oh, we're going to fail" way. On the flipside of that, confidence is a self-fulfilling prophecy. So, if you think you're going to succeed, you will succeed. And the reason for that is…you know...is that point about iteration--where you're going to keep intellectually being honest about what you're seeing, and iterate, iterate, iterate, until you get it right.

You’ve got to be willing to change, and tweak, and be confident in yourself. Not that what you're doing is going to work. In the big picture, yes--but, confident in your ability to recognize what you have to do to make it work, and being willing to change to make it work.

So, as for confidence, confidence is important. But you don't want to be arrogant or cocky. Which is, "Hey, what we're going to do is, we're going to work, and I don’t have to be intellectually honest with what's really going on." There's a fine line there.

Is there anything else that you want to tell the Duke community?

I think Duke has a very unusual promise. There’s huge potential upside with really fostering entrepreneurship and innovation throughout the entire Duke community. The reason I think that it's such a big opportunity is because of what we were saying before, where it's a bit of a blank slate. There are Duke people that have been successful in business, but it's more of a typical sort of corporate route than a, like, "Let's take over the world and fill it with a great company" route.

You're starting to see that more and more, and I think what you guys are doing is awesome. And I commend you for it, and I think that by looking at some of the--Stanford is a model. I wouldn’t say Harvard, because the people that have been successful there drop out, [Laughs] right?

But I think the right model is to get some companies going around the engineering departments and the business school. I think there's an opportunity there to work together and foster that thing.